Matt Western: It is a pleasure to follow the hon. Member for Beckenham (Bob Stewart). I join my hon. Friend the Member for Newcastle upon Tyne Central (Chi Onwurah) and others in thanking the Bill Committee, the Clerks and others who supported us so well—including the expert witnesses from whom we got to hear during that fortnight. I had not sat through Second Reading, but we had a particularly enlightening series of sessions.
I wish to speak to new clauses 5, 6 and 7, which I will be supporting, along with the Bill. I emphasise how strongly colleagues and I feel about how important national security is, and how much Labour prioritises it. That is why we welcome the Bill, following, as it does, unfortunately, the leadership of states such as the United States, Germany and the EU; perhaps we are just that much behind the curve. I am sorry to say that it is clear that the Government failed to recognise the clear and present danger of the commercial strategy of other powers. Although I very much support the Bill, as it introduces the greater powers for Government to intervene when corporate transactions threaten our national security, it is late, perhaps even a decade or more late.
As so many have said, national security has traditionally been viewed quite narrowly. Perhaps we have had the light touch of economically liberal Governments welcoming investment when in fact those acquisitions are aimed at reducing the competition, improving margins and protecting domestic interests. Also we have seen the purpose being to asset-strip those businesses of their intellectual property, often at considerable cost to the UK in terms of our knowledge base and expertise, but with the risk of seriously damaging our supply chains and having the consequent economic impact. Often this results in those businesses moving overseas. So overall, although the Government’s proposal brings the UK in line with other countries on national security, there is the need for greater powers on mergers and acquisitions, particularly in respect of what may be deemed to be beyond security but actually in the national interest, as in the US and France, where they have the powers to block takeovers of companies deemed strategic or that have major implications for national interests.
I am afraid that the past 10 years show that consecutive Conservative and coalition Governments have been persistently slow and muted in intervening to protect national security in a series of cases: Huawei and 5G has been cited frequently this afternoon: Pfizer and AstraZeneca—the proposal of course failed, but we can only imagine what would have happened to the cost of vaccines had those two companies merged and had we been reliant on one major player; Google and DeepMind; and now Nvidia and Arm technologies. Among a great many others, we have also had the takeover of GKN by Melrose and the acquisition of Cobham aviation. They are now owned by businesses based in a friendly state, which is okay and acceptable, but it is questionable how we are prepared to let some  of these important businesses—important leaders in  technologies—be disposed of, with the assets, the research and the intellectual properties of those businesses moved offshore, to elsewhere.
New clause 5 seeks to define national security. Interestingly, the right hon. Member for Reading West (Alok Sharma), the former Secretary of State, has stated that the Government had a very narrow interpretation of national security. It was surprising what came to light in the Bill Committee, where we heard that, as I understand it, in drawing up this legislation the Government had failed to engage with the Intelligence and Security Committee in the first instance. That was a shortcoming. The evidence sessions proved more than enlightening, particularly when we were hearing from some of the expert witnesses. Some of what we heard was deeply disturbing. The words spoken by Charles Parton of the Royal United Services Institute were some of the most alarming of all. He said:
“we should not underestimate the degree to which Xi Jinping and the Communist party intend, as Xi said to the first politburo meeting, to get the upper hand against western democracies… When you add that to his policy of civil-military fusion—using civil in the military context—and the fact that he has set up a party organisation specifically to push that forward, and the change in investment policy away from things such as property, football clubs and other things, very much towards benefitting China and its technology, we have to be a lot more careful than we have been in the past.”
I think he said that, perhaps deliberately, with extraordinary understatement. Perhaps most alarmingly, he added:
“I am not aware of a really good assessment of just how much technology has been bought, the targets and so on. Maybe the Government have one—I don’t know—but I do not think that they do.”
––[Official Report, National Security and Investment Public Bill Committee, 24 November 2020; c. 6, Q2.]
Perhaps that is something that the Minister could answer when he sums up.
They imply that I, as a Conservative, have only awful motivations for the decisions that I make in this House. Well, such is life. This is the lot that I picked, though, as an aside to the youth of today, I would like to point out that if they are getting their messages from people who are only giving them one side of the story, they should think about it quite hard, because there are always two sides to the story.
However, going back to this hypothetical company on social media. What happens if an enemy abroad who hates us, hates the British, hates what we stand for decides to try to buy this business and then uses this business’s reputation, subscribers and previous clever work to push really damaging ideas and—to use the phrase du jour—fake news? All of this to the people who just want to watch funny videos that laugh at silly Tories. Is that a question for national security? Should we intervene and stop the purchase of this business because we risk what is going forward? To be candid with the House, I do not have the answer to that question, and I think that that speaks to my point. Is it national security when a community of people are only seeing something wrong and dangerous? Is that national security and should we step in? I can speak to the answer yes. I can also speak to the answer  no. No doubt this House could debate it for many, many hours in an articulate fashion, such as we have just heard.
Now, if we had defined national security, would it be certain that we had the right definition to allow for this decision to be made? It is my submission to this House that we would struggle. Also, this hypothetical example of a modern company is one from our current technology. It is only catching us up with the rapid changes that we have seen in the past five to 10 years. With the detailed definition of security, what would happen when technology in businesses moves as far away from now, as I am from the rubber-keyed ZX Spectrum computer that I played with as a child. That is a huge leap. How do we define national security that will protect for the future and how do we encode a definition for something that has not even been invented yet. I am not sure that we can without unintended consequences in terms of signalling to our enemies, leaving loopholes, or not giving the flexibility that we need.
For me, protecting the realm and all of our people—all of them—requires flexibility as well as strong oversight and that is in no doubt, so I will not be supporting new clause 5 today.

Kevan Jones: I supported the Bill on Second Reading and continue to do so, because, of course, in terms of putting on the statute book the protection that we need, it is a vital piece of legislation, but, as the right hon. Member for New Forest East (Dr Lewis) said, it is possibly some seven years late. That highlights the conflict that takes place within not just this Government, but all Governments, between wanting national prosperity and national security. We had this during the coalition Government—the hon. Member for Tonbridge and Malling (Tom Tugendhat), I think, referred to it as the “golden age”, or, as the Australians would call it “a Government full of panda huggers”—but that has clearly changed. What has also changed since even 2013 is that we have a better understanding of how states are using their economic power not only for defence purposes, but to project their power to change the international world order.
It has come as a great shock to many people that, in the past few years, the international rules-based order, which we have all accepted since the second world war, has come under threat not only from hostile states, but from individuals who basically want to throw everything up in the air and see what lands.
Clearly, when it comes to China, to mention one nation, its investment strategy, including belt and road and other initiatives, is clearly being used not just in terms of projecting its economic power, but for geopolitical reasons. If we look at the long list of Chinese individuals on various standard-raising bodies—whether it be UN bodies or standard setters in the telecoms industry—we can see which areas they want to influence. The Bill is very important in ensuring that we protect that critical national infrastructure. There will be that debate—as Members will see if they read the ISC’s report, in 2013—between prosperity and security. For me, security has got to be the key cornerstone of this legislation, but it will, I think, lead to some very difficult decisions having to be taken.
As I say, I broadly welcome what is being put forward in this Bill, and I will come on to some of the new clauses in a minute, but can I first refer to new clause 7?  It has already been spoken to by the Chair of the ISC, the right hon. Member for New Forest East, in terms of oversight. The ISC is not looking for work, I can tell hon. Members that. I have been a member of it for a few years now, and we have a lot on our plate. We do not actually want to be a regulator or in any way to have to decide what should go ahead and what should not—that is the role of Government—but I think it is crucial that those decisions, some of which will be very controversial but taken for perfectly good security reasons, do need to have oversight from outside the Executive.
As the right hon. Gentleman has outlined, that cannot be done by the BEIS Committee. Again, I would not want to take away from any of the work it is doing, but we are the only Committee of all the Committees we have that has the levels of security clearance—it has STRAP clearance—to look at the evidence that will have to be put forward for taking these decisions. I think this would give the public confidence in the Bill, and when such decisions are being taken in future, the public can actually have confidence that there is some oversight of the reasons why they are being taken. So I do support new clause 7, but I accept what my Chairman says about wanting some indication of the Government wishing to take this on board. May I also raise the fact that this is not just for this Bill? I am also serving currently on the Telecommunications (Security) Bill Committee, and it is an issue—exactly the same issue—there as well.
I think the Minister is sympathetic to this, but I can tell him now—and I do not want him to admit it—that he will be getting a lot of pushback from the Cabinet Office, because the Cabinet Office somehow sees it as its role to prevent the ISC from seeing anything. As the right hon. Member for New Forest East said, it hides behind the Justice and Security Act 2013, but as he very eloquently outlined, there is already a mechanism to allow us to look at this. This is going to be an increasing problem. If hon. Members read the Act, they will see that it does not actually say that it is about actual Departments; it is about access to sensitive and secure information. That is going to be an increasing issue, whether for this Government or future Governments, because, as that is used by more Departments, it is important that Parliament and the public at least have some oversight of it.
I do not want to bash the Cabinet Office, but hon. Members will remember, if they look at the 2013 ISC report, that it is the same Department that, even though it was told by BT that BT was going to contract with Huawei, somehow conveniently forgot even to tell Ministers until much later. So, I think it is important to ensure that we have robust oversight. I look forward to the Minister’s response on whether he is going to agree to this letter. If he can give such an indication today, or even when it goes to the other place, that would be welcome, and if that is the case, I think it would be quite right not to press new clause 7. I think this is something that is missing from the Bill.
May I now refer to other new clauses? New clause 4 stands in the name of the hon. Member for Tonbridge and Malling and others, and I congratulate his Committee on its report. I accept what the hon. Member for South Ribble (Katherine Fletcher) has just said about defining national security. Putting that on the face of the Bill, as new clause 5 does, limits what can be done, although it  is good to have a debate on this. New clause 4 is slightly different, however, because it sets out a framework within which these decisions can be taken.
The Bill does not define national security or the list, and I understand why: because we cannot list the entities, and, as the hon. Lady said, something might come up in the future that is critical national infrastructure but that we have not yet thought about. We need sufficient flexibility to be able to address such situations.
New clause 4 also covers the following important area:
“(g) the potential of the trigger event to involve or facilitate significant illicit or subversive activities, including terrorism, organised crime, money laundering and tax evasion; and
(h) whether the trigger event may adversely impact the safety and security of UK citizens or the UK.”
We see good examples of states that are making strategic investments for geopolitical or security reasons or in order to acquire technologies, but, as came out in the ISC Russia report, many states are increasingly using fronts and other individuals to acquire such assets, and, having not an exhaustive list, but a framework that covers this would also flag up such matters to the Department.
We talk about critical national infrastructure being things such as power stations, electricity grids, gas mains and telecoms, but might we also say that our food distribution network, for instance, is a part of critical national infrastructure? In the early 2000s we had the fuel delivery lorry drivers’ strike, which led to a critical situation, and control of such events could fall under this. These things might be done not by a state, but by individuals related to it, perhaps acquiring large property portfolios in certain areas. Although new clause 4 is not perfect, it covers these matters.
I accept what my hon. Friend the Member for Newcastle upon Tyne Central (Chi Onwurah) is trying to achieve in amendment 7. She wants this unit to have the resources to ensure that it can do its job, and that is very important. However, we also need to ensure that there are no untimely delays, because we do not want this to be a hindrance to business.
Amendment 7 also raises the issue of the personnel who are going to perform this task. I have a huge concern, which I have raised already in terms of the Telecommunications (Security) Bill, about the type of individuals we are going to get in that unit. It is vital that we have people with not only the necessary security clearances but also the right security mindset. Some reassurance on that from the Minister would be welcome.
Overall, however, I welcome this Bill. It takes a huge step in the right direction. As my Chairman, the right hon. Member for New Forest East said, it is strange that we wait for seven years and then get two Bills very quickly, and I also look forward—I hope in the near future—to a further Bill, the hostile state actors Bill, which is another recommendation from our Russia report.
I thank the Minister for the constructive way he has taken this Bill forward—and I will be cheeky and just say to him that if he can deliver extra vaccines in Chester-le-Street this week, that will be very welcome.

Eleanor Laing: We now go over to Sam Tarry—oh no, he’s here!

Sam Tarry: I am indeed, Madam Deputy Speaker; I hope you are not too confused that I am here physically. Thank you very much for kicking me off.
I spoke at length on this legislation in Committee, where I moved a number of Opposition amendments to try to strengthen it and where we heard salient and wide-ranging witness statements and testimony on this crucial legislation. Indeed, as many Members across the House have said, the Bill is an important and, frankly, long overdue piece of legislation that will provide more robust powers for the Government to intervene when corporate transactions threaten national security, as the Labour party has long demanded. That is why we support the Bill and have tabled amendments to make it more robust.
That said, the Bill unfortunately represents a missed opportunity. It fails to go far enough to protect our national interests and our security at a time of ever changing and global emerging threats. It could and should have been used to build a more comprehensive and unified industrial strategy, which is urgently needed as we look to emerge from the pandemic and the severest economic crisis and recession in 300 years.
The fundamental task of any Government, and the reason for the Bill overall, is the protection of our national security. A critical driver of that security is the wider public understanding of the rapidly changing threats we face and the different sources of those threats. In Committee, we heard from various expert witnesses that other countries understand perhaps far better than we do what some of those threats are. Members from across the House heard evidence in Committee from the former head of MI6, Sir Richard Dearlove, who sketched out a complex picture that clearly showed that, for too long, successive Governments over many decades have placed economic interests, including our relationship with China, ahead of our human rights obligations and strategic national security interests.
That is why Labour is calling for the Government to intervene in foreign acquisitions that could damage our national interest and hamper our national security, so that the likes of the disastrous takeover of the UK’s biggest tech company, ARM Holdings, never happen again; and to use the Bill to put in place a robust framework that ensures that and that prioritises national security above all else. That would mean the Government no longer opening our doors to the highest bidder and selling off anything and everything in the process, but instead having a long-term and strategic approach to global threats—economic and otherwise—so that in the post-Brexit world we now inhabit, national security does not take a lesser priority than free market fundamentalism.
Indeed, over the past decade, the Conservative Government have allowed foreign direct investment to grow rapidly. In the past two years alone, it has almost doubled, from £36 billion to £66 billion. That, of course, is to be commended and much welcomed in many cases, with thousands of jobs created across the country. However, where the investments are being made is the cause of a great deal of concern. Worryingly, on only 12 occasions in the past 18 years have there been national security assessments to scrutinise such investment, with  not a single block on a takeover during that period. That is deeply concerning, because as has been well documented across the House, enterprises controlled by potentially hostile countries have been handed contracts for 5G or to build and invest in crucial national infrastructure, such as nuclear plants, giving them potential control of critical infrastructure, personal data and cutting-edge technologies. This should not be about making as much money as possible but about our Government prioritising our nation’s security.
We must learn from our partner nations that have put in place similar measures recently to deal with this growing threat. For example, in the US and across the EU, wide-reaching laws have been implemented to enable intervention in investment transactions where national security or national interest concerns are at stake. The EU proposed them in 2017, and Germany updated its legislation the following year, around the time the US did the same. The national security definition clause we have tabled would bring us in line with our allies and would treat this matter with the seriousness it deserves.
The Bill transforms the UK’s merger control processes, and that is a key part of it that we would not want to be overlooked, but it locates merger control processes away from the Competition and Markets Authority, with its history of merger control expertise, and into the Department for Business, Energy and Industrial Strategy, which unfortunately has no existing expertise in merger control. It does this at the same time as massively expanding the scope of intervention. In the face of such sweeping powers, we should not abandon all accountability just because the Secretary of State says the words “national security”, even though they happen to be at the top of the Bill. Too often during the pandemic, we have seen the Government run roughshod over parliamentary accountability and scrutiny, and national security is simply too important to have that happen again.
The amendments put forward by the Opposition would hold the Government to account through aggregate transparency, with specific focuses on unit efficiency, unit capacity and small and medium-sized enterprise interactions. We are also supporting the Intelligence and Security Committee’s amendment, which would require the Government to publish an annual security report to the ISC, allowing the Committee to bring some accountability and transparency to the Government’s actions without, of course, compromising on security. The UK, thankfully, is globally recognised as an open and attractive destination for foreign investors. However, our openness has made us vulnerable to exploitation by foreign actors who do not always have our nation’s best interests in mind, and we must act before our security could potentially be compromised. Labour’s amendments to the Bill, and a clearer definition of what national security means, would enhance this legislation and make it more fit for purpose.
I would like to turn to the clause that has been put forward on SME support, because this is crucial to their long-term survival, given the precarious position that many of them are currently in. Small and medium-sized enterprises are enormously important for constituencies such as my own in Ilford South. They are the backbone of our community businesses and a driver of the local economy, but they have faced unprecedented difficulties during the ongoing pandemic. It is therefore vital that the Bill does not lead to SMEs being hamstrung by more red tape.
As the true party of small business, Labour is calling for greater guidance and support for our innovative small business sectors, so that the Government do not once again allow SMEs to fall by the wayside. Any business, whether small or large, needs certainty, and the publication of comprehensive guidance and an early understanding of compliance will allow many SMEs to navigate their way through these new requirements. But above all else, guarding national security should not mean abandoning those SMEs, because they are the engine of national innovation and local economic growth in so many parts of our country. That means that the Government should establish a dedicated SME unit within the Department for Business, Energy and Industrial Strategy that can guide and mediate for those businesses as they progress through the national security screening process. National security is and must always be our highest priority; it is Labour’s highest priority. In the post-Brexit world, we want to be a country that is as open and positive as possible towards investment from international partners only if they share our values and objectives of supporting and rebuilding Britain.

Andrew Griffith: May I first take the opportunity today to congratulate our friends in the United States? They are one of our longest and most enduring partners, including in the domain of investment, where we are each one of the largest investors in each other’s economy. In fact, 1 million people in the UK go to work every day for an American company, and 1 million Americans work for British companies.
Unlike many of the other speakers in this debate, I want to talk about investment. This Bill should not be about the NHS or employment law or foreign policy, but it is—or at least it should be—about the world-liberating, poverty-alleviating force that is the global movement of capital to make a profitable return. We are all deeply vested in its continued success. The UK economy is one of the most open in the world, and our prosperity depends on that. The salaries and pensions of one in every three nurses, doctors and teachers depend on the cyclotron of capitalism that combines our world-leading science and intellectual capital with human talent from all over the world to invest in and create economic activity here in the UK. So I am pleased that the Minister, who I know is a great friend of business, has once again confirmed that the Government will always enthusiastically champion free trade and provide the warmest of welcomes to overseas investors. He is right to remind us that, since 2011, over 600,000 new jobs have been created in our economy, thanks to over 16,000 foreign direct investment projects.
In putting forward new clause 5, Opposition Members put forward a veritable laundry list of subjective factors that are at odds with the clarity and certainty that investors need from this Bill. They would put the UK into a concrete overcoat at just the moment of our greatest opportunity. From the buoyant top, we would plummet to the depths of the world rankings in attracting international investment. It is almost as if Opposition Members do not want the British people to taste the fruits of the successful Brexit that they tried to thwart.
From an external perspective, the British economy is a highly attractive investment prospect: a stable, pro-free enterprise democracy with tariff-free access to European  markets, close links to the faster-growing Commonwealth countries and native use of English, the universal language used by the fastest-growing sectors and economies of the world. The opportunity is the stability of Switzerland, combined with the dynamism of Singapore.
As net zero champion, I see examples daily of entrepreneurs and investors pursuing opportunities in the expanding clean growth sector. British-based firms are exporting electrolysers to Europe and fuel cells to Asia. The City of London is a world-leading hub for green finance, while our airports and airlines are the same in sustainable aviation. Elsewhere, similar opportunities exist in artificial intelligence, quantum computing, the life sciences, satellites, aerospace and FinTech, where the UK science and research base positions us very strongly. It is not just rhetoric; economists rightly forecast that UK growth this year will outstrip the US, Japan and the EU.
I urge Opposition Members to withdraw their amendments to the Bill and to allow it to go forward today. Having allowed the golden goose of the UK economy to continue to prosper, we can engage in a legitimate debate about how best all may share in the fruits of that success. [Interruption.]

Eleanor Laing: Order. We cannot have Members sitting here in the Chamber—under the cover of masks, so I cannot see their mouths moving—making comments about things that people are saying virtually. It just does not work and, quite frankly, it is not fair. We really must watch the level of behaviour while we are trying to balance this difficult situation in the Chamber.

Jim Shannon: Thank you, Madam Deputy Speaker, for allowing me the opportunity to speak this afternoon. I have followed with great interest every stage of the Bill. I do so with a somewhat vested interest. That is not that I have investment portfolios or similar, because I do not, but because I am fully aware of the potential that exists within Northern Ireland for foreign investment from the positive advantage we now have.
As the previous speaker, the hon. Member for Arundel and South Downs (Andrew Griffith), said, Brexit has given us some opportunities for investment for the future. I see potential for that, as he does, and hopefully as others do, too. Northern Ireland has become the cyber capital of Europe, with our low business rates, superfast broadband in urban areas, wonderful global connectivity—before the pandemic, at least—and a highly skilled local workforce. It is little wonder that more people have decided to make Northern Ireland the home of their global business, and the opportunity is there for much more.
For that reason, I have followed the Bill closely to ensure that it protects our nation as a priority, and I am firmly behind the Government in that aim. I support the objectives that others have set out, and that the Secretary of State will set out at the end of today’s debate. I also want to ensure that the Bill is not overly prohibitive to companies that see opportunity to invest in my constituency of Strangford and in the Ards council area, but have concerns about the mechanism through which the Secretary of State can put a hold on investment for certain reasons.
I share the concerns of my colleagues that more detail is needed on what constitutes a reason for the Secretary of State to become involved. It is my desire that, rather than a substantive statement by the Secretary of State coming after the passing of the Bill, one should be appended to it. I seek some clarification on this matter. That would enable investors and those businesses seeking investment to know the parameters within which they are working.
I must be clear: I do not wish to water down the aims of the Bill—that is not my intention whatsoever. However, I share the concern of some Members that Chinese companies are under an obligation to share information with the Chinese Government. I remain concerned about overly onerous legislative commitments for small investments and small firms, but I must accept the evidence of the loopholes that foreign investment companies have made their way through by purchasing intellectual property rights and the like. I see how our system has been abused thus far, and I stand with Government on the need for an overhaul, which is the purpose of this legislation. However, I believe that we need the detail to have the strong and all-encompassing legislation required to keep our nation safe. I again implore Ministers to consider this. The safety of the nation has been spoken about by many Members, and it is certainly a priority for me and my party.
I am thankful for the trigger events set out by Government in the White Paper. I understand the rationale behind those and fully support them, especially the fact that Government’s rationale for introducing mandatory notification for these trigger events is the same as for the trigger events themselves. That is to say that the acquisition of over 25%, over 50%, over 75% or more of votes or shares represents thresholds at which parties can respectively block a special resolution, pass an ordinary resolution or pass a special resolution, as set out in the Bill. It is the delay in the secondary legislation after public consultation that concerns me. Surely the Bill will be stronger when it is complete. Again, I seek the Secretary of State’s reassurance on that.
I thank the Secretary of State, the Chair of the Foreign Affairs Committee, the hon. Member for Tonbridge and Malling (Tom Tugendhat), and all Committee members for their hard work. We have before us a Bill that we can be proud of and that will lead to the security we need.
In conclusion, is there a reason why we cannot put all the pieces of the jigsaw together and present clear legislation which ensures that both the investor and the company know and understand the prerequisites and that we are all able to play our part to ensure that the security of this nation—the United Kingdom of Great Britain and Northern Ireland, better together—is not at stake, while enabling us to thrive in the future?

Bob Seely: I thank the Minister for his work and for being here for the debate; I know how busy he is, so I am most grateful. I will speak to new clause 4, which provides a definition of “national security”. After listening to some of the speeches, I wonder whether I am going to play the role of General Melchett in “Blackadder” when I insist that “security” is not a dirty word. Let me try to put the argument in  favour of a national security definition. My hon. Friend the Member for Tonbridge and Malling (Tom Tugendhat) suggested that I do so, and I am grateful to him for the opportunity. Like him, I thank Nicole Kar and Alice Lynch, who supported the work of the Foreign Affairs Committee.
New clause 4 provides a non-exclusive framework of factors that the Secretary of State would be obliged to regard when he is assessing takeovers or work in this field. It does not limit the Secretary of State in any way, as my hon. Friend the Member for South Ribble (Katherine Fletcher), who spoke eloquently, and others suggested. It provides a public recognition and a public baseline of things that should be considered. As such, it is a sensible amendment to improve the Bill, as well as providing a wider public service by defining national security in the modern era. I would like to make a few background points and then speak for between five and 10 minutes on a few other points.
We need a definition of national security, because the alternative is to have a vague and unstated set of assumptions. The amendment is broad, but it sets quite a high benchmark. It is not a generalised catch-all, nor does it contain a substitute for an industrial policy; that is another debate. The Cadbury takeover would not be included in this, nor would a Stilton creamery in South Notts—it might in France, but not in this country.
In this country we have a tendency to romanticise vagueness, as if planning were a bad thing and muddling through a strategic art as well as a national pastime, with this just-in-time Dunkirk spirit. I think it was Churchill who noted that, actually, Dunkirk was a military disaster, not a victory, and that if we had got our security and strategy right in the years previously, we could have avoided glorifying disasters because we would not have been in that disastrous position in the first place. A more systematic approach to national strategy—frankly, I think we need a national strategy council—but also to security and the definition of national security is important.
My next point is that the nature of national security has changed, and we need to be mindful of that. It is not simply about defence and espionage and the immediate threat to the realm. We have seen from Russia and China a combining of non-military and military, of covert and overt strategies—people call it hybrid war, grey war, under-the-radar war; there are about 25 definitions doing the rounds. This is not a war as such, but it is a form of state struggle and state conflict. Some states in the world, including very significant states such as Russia and, perhaps to a lesser extent, China, see things as a zero-sum game. We need to understand that liberal internationalism is not the only show in town and not the only way to understand international affairs. The west is good at many things, but seeing the world through the eyes of others is not necessarily one of them.
These new states, as many people here have said, use multiple and novel tools, including economic power, energy power, espionage, blackmail, information war and even cultural and religious power, as well as military and paramilitary power, and they use different templates and different tools in different parts of the world. Clearly, the tools that China uses in Xinjiang province are different from the ones that it uses in the City of London or to reach out to parliamentarians. The tools that Russia uses in eastern Ukraine or Kiev are different  from the ones that it uses in the UK. Is the Kremlin’s use of Russian Orthodoxy a national security threat to us? No, of course not. But is its use of oligarchs and informal channels to influence senior political and financial elites in our country—the hon. Member for Aberavon (Stephen Kinnock) called it “elite capture”—a potential threat to national security? Yes.
The right hon. Member for North Durham (Mr Jones) was right to mention how states are using those new powers and how they use power to bend or break the international system. My hon. Friend the Member for Tonbridge and Malling has also spoken about that repeatedly, as indeed have many of us on the Foreign Affairs Committee. That international system is not perfect, but it has served humanity well.
It is important to understand that national security is not just about a narrow defence threat; it is broader. China has published a document, “Made in China 2025”, outlining how it plans to dominate data, artificial intelligence, big data and so on. Is it a threat to our communications infrastructure if we are dominated by a one-party state with a very different values system? I am not saying definitely, but potentially it would be.
The Henry Jackson Society and I produced a report on Five Eyes supply chain reliance on China. Over a quarter of British supply chains are dominated by China, and the UK is strategically dependent on China for 229 categories of goods, 51 of which have potential applications in critical national infrastructure spheres. We need to be mindful of the impact of that on our national security.
There are companies that are going to be bought and universities that are going to be working on gait technology and facial technology. I do not doubt that there are some countries in the world that will use that technology to improve their mass transport systems, but there are countries—China is potentially one of them—that will use it as a means of controlling their people more effectively and developing the sort of Orwellian state that is a potential threat to humanity and mankind.
Let me look specifically at new clause 4. As I said, my hon. Friend the Member for South Ribble talked about the need to be nimble, and she is exactly right, but osmosis is not a way to provide a definition of national security. The new clause obliges the Government to look at a series of areas. We tried to make it broad, but it sets a high bar. It requires the Government to look at the critical supply chain, critical national infrastructure and national resource. A year ago, who would have argued that personal protective equipment manufacture, vaccine supply or AstraZeneca’s cyber-security were national security issues? Probably nobody. Who now would deny it? Probably nobody. This is a significant element of our national security.
Another example—one that has worried me greatly—is that the Government did not see Huawei’s domination of 5G as a national security issue. They chose not to listen to those people in the agencies who said that it was and set a clear political direction. It concerned me particularly that, bizarrely, BEIS and other Ministries presented Huawei in this House as a private firm when, clearly, it was part and parcel of the Chinese state. Therefore, having a clear definition in the Bill of what Ministers are obliged to look at would help to guide them to come to good decisions in the national interest, and that is what we are trying to do.
We are trying to do things in the national interest to improve the Bill where we can. Paragraphs (b) and (c) address the threat from individuals and to individuals. Paragraph (c) addresses the nature of potential acquirers of UK firms. The hon. Members for Aberavon and for Newcastle upon Tyne Central (Chi Onwurah) spoke very eloquently about this, and Huawei is instructive.
My hon. Friend the Member for Tonbridge and Malling spoke about two companies that were bought when perhaps they should not have been, and we need to look at the nature of potential acquirers of UK firms. It is not an attack on laissez-faire economics or on our role as a free market and dynamic, global economic centre to accept that a national security definition, along with good laws, helps to provide a framework for honesty and integrity in business life. Paragraph (f) addresses national security and our responsibility to oppose modern slavery and genocide, which is an important issue for me, but again it sets an extraordinarily high bar.
Paragraph (g) addresses the potential threat of global organised crime. Again Russia, specifically, has tried to influence other countries in this way. Yes, that could be a potential national security risk. Finally, paragraph (h) gives the Secretary of State the flexibility to take a generalised approach to things that are not in the interests of the UK and are a threat to our interests or our citizens.
This new clause is a baseline, not a limiting factor. It helps to provide guidance for the Secretary of State and for BEIS. Frankly, this should be cross-departmental. We need our own CFIUS, and why we do not have one I do not know. Again, that is a concern. I will not address it now, because it clearly is not in the amendment and I am wrapping up.
I fear that the vagueness on national security does not help this Bill, nor does it help national security and its role. Clarity is needed in the long term to help us provide better strategy and a better understanding of the opportunities and risks that face this country in the years ahead.

Kim Johnson: I start by congratulating Joe Biden and Kamala Harris, and by wishing for a violence-free inauguration today. Good riddance to the outgoing President. We will not miss his hate speech.
The National Security and Investment Bill seeks to usher in sweeping reforms to how our Government can scrutinise foreign investment. It proposes strong measures to toughen foreign investment rules and to bring the UK into line with other major countries in key sectors. These steps to keep high-growth and strategically important companies in the UK are overdue and highly welcome, but does the Secretary of State agree that, for the UK to have an active industrial policy that works in the public interest, the Government must go further than just blocking hostile mergers and acquisitions, and instead implement a robust industrial strategy that puts critical national infrastructure at the heart of Government policy?
One example is the recent takeover of Arm, the crown jewel of the British tech sector—a genuine global powerhouse worth more than £31 billion and with more than 6,000 employees. Its recent sale to Nvidia, a US tech giant worth more than £338 billion that is tucked away in the tax-light and secrecy-heavy state of Delaware,  provides a clear example of the risky and problematic sale of a British firm to foreign investors, which threatens both security fears and job losses.
Nvidia competes with companies that Arm supplies. Arm’s co-founder declared the takeover to be a “disaster” that will destroy the company’s business model and lead to job losses at its Cambridge headquarters and elsewhere in the UK. He also said:
“It is very much in Nvidia’s interest to kill Arm.”
At the time of the sale, Unite the union, which represents Arm workers, declared that, if allowed to go ahead, the sale
“risks the company’s UK operations being run down and jobs and investment moved abroad.”
I wholeheartedly support Unite’s call for the Government to protect tech firms from being hollowed out by detrimental takeovers, and to provide the investment needed for the sector as a whole to flourish.
Although the Bill makes great strides in bringing UK legislation in line with that of other countries in giving the Government significant powers and oversight of all investments to protect national security, gaping holes remain in our powers to protect jobs and industry here in the UK. With the country’s manufacturing sector already on its knees, dismantled and sold off in the Thatcher years and subsequent decades, do the Government not agree that it is high time for a robust industrial strategy that bolsters high-skilled, high-paid and sustainable jobs, to invest in our communities and rebuild after decades of industrial decline and the economic fall-out from coronavirus?
We need to support this legislation to protect UK jobs and industries from foreign, hostile acquisitions that could damage the UK economy and lead to job losses, but we cannot ignore the lack of investment or attention by our Government in developing the UK’s industrial strategy. If we are talking about protecting jobs and industry here in the UK, the two cannot be separated. If the Government are serious about industrial strategy, we need stronger powers, such as those in France and the USA, to intervene in takeovers to protect our vital interests, particularly in our tech sector.
We also need serious planning and investment in these sectors, training and reskilling of our workers, and strategic investment in line with the plans for regional levelling up to provide the necessary conditions for these sectors, and the communities dependent on these jobs, to flourish. Now is the time for bold action to put critical national infrastructure at the heart of Government policy, and to retain high-growth and strategically important companies in the UK.

Bob Stewart: Enhanced protection of our national security is obviously at the heart of the Bill. It has come not before time, too. It has had a gestation period of something like seven years since the Intelligence and Security Committee first raised the matters that it addresses directly. As a member of the Committee, I will not repeat what my right hon. Friend the Member for New Forest East (Dr Lewis), the Chair of the ISC, or the senior Opposition member of the ISC, the right hon. Member for North Durham (Mr Jones), have said  with regard to oversight of investments. I think the point has been well made, and I totally accept that the Minister gets those points.
Let us be clear, though, that if a potential enemy state can get critical information and technologies, it is highly likely to do so. In truth, as we all know, the UK is a primary target for a broad range of national security attacks from both foreign intelligence agencies and organisations, as well as companies, which certainly are operating at the moment. If a company that is British and world leading in a technology—for instance, artificial intelligence or robotics—is bought by a foreign investor from a country that is not particularly friendly to the UK, we must have a system to ensure that British technology, ideas and even hardware are not simply hijacked and possibly used against us. We have to stop that.
Unless the United Kingdom curbs the right of foreign firms and investors to obtain technologies through the means of mergers and acquisitions and similar, our advanced technologies could easily find their way into weapons systems of foreign, potentially hostile states. These days, weapons systems should be much more broadly defined. They include possible attacks on the way we live. For example, using the internet to turn off water purification and supplies or just sewerage would have a dramatic and immediate impact on British society. I reckon that is a weapons system these days. In future, investors will have no choice but to notify the Government if the ownership of certain businesses is to change hands. That is good news. I note, too, that the Secretary of State will also have the power to call in other businesses if he or she has concerns about national security. That is good, too: it allows for sensible flexibility.
In contrast to others who have spoken, I think we should be careful about defining exactly what national security involves because it changes all the time. It is difficult to pin it down. We know what it is, but I am worried about defining it.
Within the Department for Business, Energy and Industrial Strategy will now sit this new investment security unit, which will be tasked with supervising sensitive sectors of our economy. I know that those sectors have yet to be fully defined, but most are pretty obvious—defence communications, energy, cryptography, satellite and space technologies and many more. But in the fast-moving modern world that we live in, it will also be important for the investment security unit to look actively at seemingly innocent technologies and systems, which in the wrong hands could bring our society to a grinding standstill. Others have mentioned the national grid: if that could be disabled by the simple means of remote instructions, the whole of the country’s electricity supplies could be turned off. Just think of how difficult that would be!
Keeping sovereign control over the methods of controlling something like the national grid is crucial. I presume and hope that the investment security unit will spend some time looking out for non-obvious threats. Having once been an intelligence officer, I know that trying to identify the threat, the signals that identify what is about to happen, is really difficult because they are embedded in a plethora of noise. But this investment security unit will have to try.
I am pleased that the Bill extends the current screening powers to allow the Secretary of State to investigate the acquisition of sensitive assets in intellectual property as  well as the straightforward acquisition of companies. In short, I support the Bill and I am pleased that it has at last reached this stage.

Matt Western: It is a pleasure to follow the hon. Member for Beckenham (Bob Stewart). I join my hon. Friend the Member for Newcastle upon Tyne Central (Chi Onwurah) and others in thanking the Bill Committee, the Clerks and others who supported us so well—including the expert witnesses from whom we got to hear during that fortnight. I had not sat through Second Reading, but we had a particularly enlightening series of sessions.
I wish to speak to new clauses 5, 6 and 7, which I will be supporting, along with the Bill. I emphasise how strongly colleagues and I feel about how important national security is, and how much Labour prioritises it. That is why we welcome the Bill, following, as it does, unfortunately, the leadership of states such as the United States, Germany and the EU; perhaps we are just that much behind the curve. I am sorry to say that it is clear that the Government failed to recognise the clear and present danger of the commercial strategy of other powers. Although I very much support the Bill, as it introduces the greater powers for Government to intervene when corporate transactions threaten our national security, it is late, perhaps even a decade or more late.
As so many have said, national security has traditionally been viewed quite narrowly. Perhaps we have had the light touch of economically liberal Governments welcoming investment when in fact those acquisitions are aimed at reducing the competition, improving margins and protecting domestic interests. Also we have seen the purpose being to asset-strip those businesses of their intellectual property, often at considerable cost to the UK in terms of our knowledge base and expertise, but with the risk of seriously damaging our supply chains and having the consequent economic impact. Often this results in those businesses moving overseas. So overall, although the Government’s proposal brings the UK in line with other countries on national security, there is the need for greater powers on mergers and acquisitions, particularly in respect of what may be deemed to be beyond security but actually in the national interest, as in the US and France, where they have the powers to block takeovers of companies deemed strategic or that have major implications for national interests.
I am afraid that the past 10 years show that consecutive Conservative and coalition Governments have been persistently slow and muted in intervening to protect national security in a series of cases: Huawei and 5G has been cited frequently this afternoon: Pfizer and AstraZeneca—the proposal of course failed, but we can only imagine what would have happened to the cost of vaccines had those two companies merged and had we been reliant on one major player; Google and DeepMind; and now Nvidia and Arm technologies. Among a great many others, we have also had the takeover of GKN by Melrose and the acquisition of Cobham aviation. They are now owned by businesses based in a friendly state, which is okay and acceptable, but it is questionable how we are prepared to let some of these important businesses—important leaders in technologies —be disposed of, with the assets, the research and the intellectual properties of those businesses moved offshore, to elsewhere.
New clause 5 seeks to define national security. Interestingly, the right hon. Member for Reading West (Alok Sharma), the former Secretary of State, has stated that the Government had a very narrow interpretation of national security. It was surprising what came to light in the Bill Committee, where we heard that, as I understand it, in drawing up this legislation the Government had failed to engage with the Intelligence and Security Committee in the first instance. That was a shortcoming. The evidence sessions proved more than enlightening, particularly when we were hearing from some of the expert witnesses. Some of what we heard was deeply disturbing. The words spoken by Charles Parton of the Royal United Services Institute were some of the most alarming of all. He said:
“we should not underestimate the degree to which Xi Jinping and the Communist party intend, as Xi said to the first politburo meeting, to get the upper hand against western democracies… When you add that to his policy of civil-military fusion—using civil in the military context—and the fact that he has set up a party organisation specifically to push that forward, and the change in investment policy away from things such as property, football clubs and other things, very much towards benefitting China and its technology, we have to be a lot more careful than we have been in the past.”
I think he said that, perhaps deliberately, with extraordinary understatement. Perhaps most alarmingly, he added:
“I am not aware of a really good assessment of just how much technology has been bought, the targets and so on. Maybe the Government have one—I don’t know—but I do not think that they do.”
––[Official Report, National Security and Investment Public Bill Committee, 24 November 2020; c. 6, Q2.]
Perhaps that is something that the Minister could answer when he sums up.
We also heard from Sir Richard Dearlove, former director of MI6, who expanded on the threats and made it quite clear that the extreme naivety of recent UK Governments had allowed the Chinese in particular, although there were other states too, to become deeply embedded in the UK economy. He underlined his concerns by saying that we had been
“pretty naive and had forgotten the fundamental dangers of having a close relationship with China.”
He added that
“we have to understand where we restrict their access, where we control their access and where we do not allow them to build strategic positions at our expense and literally take us for a ride It was completely ridiculous that we should even have been considering Huawei to build our 5G.”––[Official Report, National Security and Investment Public Bill Committee, 24 November 2020; c. 19-27, Q21.]
That is what is important about the Bill.
Although I have a lot of sympathy for new clause 4, I will concentrate on new clause 5. Sir Richard set out the breadth of the threat; he highlighted the fact that it was not just to our businesses but to our infrastructure and academic institutions. It is worth remembering that only 10 years ago, the coalition Government were hailing a new golden era, and were desperately seeking to attract investment from China, seemingly oblivious to the national security issues surrounding any investment in nuclear power stations or transport infrastructure. Meanwhile, the open access that Chinese businesses have had to UK universities includes the hiring of UK  academics. That is both is surprising and unexpected, and a recent report demonstrated the scale of the problem, stating that at Oxford University, 17 projects were under way with Huawei.
It is clear that the narrow, more obvious view of national security, as we have heard, is incredibly naive about what is happening around us. The UK has been guilty, particularly in the last decade, of playing to the old rules when the game has moved on. If we did not understand that, we should really have learned from 9/11 that the threats to national security, as we heard from the hon. Member for Beckenham (Bob Stewart), are both the same and very different. That is why we have introduced the new clause—to widen the definition of security, so that it includes critical national infrastructure, energy resilience, and food supply, and also relates to human rights and environmental security. We are pushing for greater guidance and clarity for businesses, as well as true security for our citizens in the broadest sense.
New clause 6 seeks to set up a small and medium-sized enterprise engagement unit to help SMEs engage with this process. For years, the Government have refused to do more to protect growing UK companies. Developing a robust takeover regime is essential if we want firms in our key sectors to grow and provide good jobs in the UK, rather than sell up and move abroad. We must keep those businesses here in our country.
The regime means that we would go from 12 national security investigations in total since 2003 to an annual expectation of 1,800 or 1,900 notifications, with perhaps 60 to 100 called in by the Secretary of State and subjected to detailed review. That vast expansion would be managed by the entirely new unit that we have heard about. It would be based in BEIS, which traditionally has not taken responsibility for national security. We must ensure that there is sufficient resourcing and expertise, as we discussed frequently in the Bill Committee, and we must also ensure that there is accountability to Parliament, as well as performance transparency.
On that huge increase in referrals, the Government expect SMEs to account for about 80% of mandatory notifications under the new regime. Naturally, that represents a huge challenge for tech start-ups that raise investment in rapid transactions in sectors that are capital-intensive, particularly in the early phases of their development. There is clearly a need for greater BEIS resource to support SMEs with early engagement, and we must ensure that there is accountability from BEIS in that regard.
Recent history is littered with examples of great nascent businesses being lost to voracious venture capitalists, whether they are from benign nations or, more concerningly, are a front for the investment arm of a state, especially those states that we regard as less than friendly. A small business example is Stonewood Electronics, a global leader and innovator in data security. It was a supplier to the UK Government, intelligence services and military—a home-grown business based in the UK. It was a brilliant, advanced technology company, but is now just a shell based in Farnborough, with all the value transferred to the US. It is not just companies such as GKN and Cobham aviation or the Centre for Integrated Photonics; so many businesses across the UK are seen as very attractive targets to friendly, benign nations, as well as to those who have more concerning interests in taking over some of our technologies.
Finally, I will address new clause 7, which would require the Government to publish an annual security report to the Intelligence and Security Committee of Parliament. It is clear that with the day-to-day pressures, and the wider picture of activity and patterns, there is a need for this kind of reporting—and perhaps it should be even more frequent than is being suggested. I listened with interest to the remarks of the right hon. Member for New Forest East (Dr Lewis), and was surprised that his views and those of the Committee were not taken on board earlier. The ISC should be much more centrally involved, where appropriate. It will have material that is really important to the Committee, but that might not be available to the BEIS unit.
It is important that there be these powers for intervention, given the various types of threats that I described. The investment screening process—the scrutiny—needs to be so great, and that is why the abilities and skills of other Departments should be brought into play. We proposed that in Committee; we suggested that there be an overarching structure that can bring in the minds and understanding of people in the sectors, whether they be in the academic sphere or from the Department for Environment, Food and Rural Affairs, so that they can discuss their knowledge of the sector with BEIS.
What is most important is that there is the capacity in the unit, given the increase in the volume of referrals that I described, particularly from small and medium-sized enterprises, which will be desperate for funding, tie-ups and opportunities. The speed with which this unit can respond will be really important, and this report should identify where there are issues and bottlenecks, so that we can ensure a speedy process. That way, small businesses that need the funding and support can be allowed to proceed where the takeover is not deemed to be suspicious, or to the detriment of the UK.
In summing up, I confirm that we on the Opposition Benches absolutely welcome the Bill. Colleagues who have been in Parliament for many more years than me have long called for it. We are indeed playing catch-up, but we are where we are. We do have regulation, and it is needed, but countries such as the US have had stronger regulatory enforcement for decades; interestingly that was strengthened and broadened under the most recent Trump Administration. France introduced very similar measures to those we are talking about back in 2014, and recently, Germany introduced further measures to block foreign takeovers in the health sector, for example.
It is quite clear that national security is not just in our defence interests; national security is the defence of our prosperity, and indeed our way of life. With this Bill, we are at last considering our commercial interests, including the interests of our research institutions, and the areas where the two meet. National security is a primary responsibility of Government, and hopefully the Bill will see the Government start to think about our economic strategy and resilience, but they must also think about our social resilience, as so many have said. That has to be a good thing.

Nigel Evans: Order. It is quite clear that the gremlins have defeated us on this particular occasion. It is incredibly rare. We know that this is a very important subject matter and we will endeavour to ensure that Mr Morgan is able to move his motion again in the very, very near future.
Question put and agreed to.
House adjourned.